State Tax Refunds

A while ago, I commented on the fact that the State of Missouri was short on cash, making people wait for their income tax refunds. I predicted that more states would be trying this trick.

According to this story, Illinois is in the same boat as are several states in regard to much lower tax revenues than their crystal balls had foreseen, and is making people wait. However, rather than wait until the next wave of expected estimated tax payments arrives in Springfield, the Illinois rulers are borrowing money to come up with the refund cash. That’s only right because it’s what a person would be expected to do if s/he owes money to the State.

This is also a very clear reminder of how stupid it is to overpay your taxes and expect a big refund check next year, as far too many people do.

KMK

The Pot Calling the Kettle Black

I’m glad to see so many others pick up on the sheer hypocrisy of our rulers in DC lecturing corporate executives on proper accounting techniques.

New Secret Weapon

I told you that we accountants have now become a prime target of jokes. It promises to be a funny Summer.

Pay To Be On Scam Reality Show

I happened to open a piece of spam that was an invitation to apply to be on a new reality show called Rally Racer, where contestants can supposedly become race car drivers and compete for a million dollars.

When you check out their website application, they are requiring that applicants pay them $11.95 now by credit card or $14.95 by online check. I’m sure the discount for using a credit card is because it allows the scammers to make future charges against the card.

With all of the people in this country desperate to be on TV, it’s a good bet that they will rake in a ton of money before the authorities shut this scam down.

KMK

Not Going To Take It

Too many of the people in power, at all levels of government, are under the impression that they can just arbitrarily raise taxes & fees on various groups with complete impunity. That’s why it makes me happy to see the victims of new taxes fight back, such as these department stores in New Jersey, who will move more of their operations out of that state in order to avoid a new tax aimed at them.

If enough tax targets of over-reaching government rulers will take explicit action against unreasonable taxes, rules & regulations, I’m hoping the real people will eventually wise up and kick those jerks out of office.

I have been reading about how the rulers in my former home state, the PRC (People’s Republic of California) are demanding that the auto manufacturers only sell vehicles that put out a ridiculously low level of emissions and get impossibly high miles per gallon. My dream is that the car companies will tell the PRC despots to stick those rules where the sun doesn’t shine and refuse to sell any new vehicles in that state. Sooner or later, the people will demand that they be allowed to buy those vehicles and will boot their rulers out the door.

This is a good illustration of how to deal with tax laws that we don’t like. Rather than just refuse to comply with them, as the tax protestors I so often discuss advise; there are two better ways; which will keep you out of prison. First, you can arrange your matters so as to legally avoid the taxes, such as move your operations to a less hostile jurisdiction. The best way is to go to the source and have the law officially changed by our rulers, which most often will require electing new ones who respect the Constitution.

KMK

Corporate Tax Returns

Bruce Bartlett expands on my earlier comments on the different accounting methods used by large corporations on their income tax returns versus the financial statements that are provided to investors. He has some additional good ideas to ponder.

Statistics

The US Commerce Dept’s GDP (gross domestic product) statistic, one of the most often used barometers of the nation’s economic activity, is compiled from data that had been submitted to IRS. On the other hand, the S&P (Standard & Poors) 500 earnings reports are based on the investor financial statements as submitted to the SEC. In an ironic twist, this means that the GDP figures are actually the more accurate representation of true corporate profits because corporations do everything they can to tell IRS that their profits are truly as low as possible.

Release Corp Tax Returns

Because of the more accurate nature of corporate tax returns, Mr. Bartlett recommends that corporations be required to open them to the public as a condition of being listed on the major stock exchanges. As someone who prepares several corporate tax returns each year, I had to mull this idea over for a bit. At first blush, tax returns are privileged information between the taxpayers and the IRS and the public has no business prying into it.

However, on the other hand, stockholders of a corporation are entitled to complete fiduciary responsibility by the corporate officers. When I prepare corporate returns where there are multiple stockholders, I have always taken for granted my obligation to make copies of the returns for each owner. When a person is considering the purchase of a small corporation, some of the most essential documents to review are previous corporate income tax returns. Extrapolating out to the world of huge corporations, any investor or potential investor should be entitled to the same level of disclosure.

KMK

Where Does the Money Go?

With all of the talk about the decrease in the value of the stock market and the huge losses that people are suffering, I thought I would share the following question & answer from a few weeks ago on AskMe.com.

The point is that the wealth that disappeared never really existed. The way the numbskull media are reporting things, you would think Martha Stewart and her gang of delinquent CEOs were breaking into old folks’ homes and stealing the cash that they had stuffed under their mattresses for their retirement years.

Anonymous asked this question on 6/21/2002:

When the stock market drops significantly, such as the drop for the past two years, there are a lot of investors losing money. Where did the money go? I know before the market drop, the high price level was supported in part by margin buys. Therefore, the high price level is partially inflated by margin loans. However, for the past two years, it is said that trillions of dollars disappeared in the stock market. After the margin factors are adjusted, where did the trillions of dollars go? Do the trillions line up the pockets of some smart investors who took the money out before the market plunged?

TaxGuru gave this response on 6/21/2002:

You are confusing cash and wealth. The value of the stock market isn’t actual cash. It’s just an estimate of what people would pay for those shares at a certain point in time. If those perceived values decline, the overall value of the stock market drops accordingly. No cash changes hands.

It’s the same with other assets, such as real estate. If your home is considered to be worth $200,000 today and its perceived value drops to $150,000 next year, your wealth will have decreased by $50,000. However, nobody is receiving that $50,000 in cash.

It’s the exact same thing with the stock market. Perceived values don’t equate to any actual money changing hands.

Kerry

QuickBooks Resources

I am such a big fan of the QuickBooks programs that I am devoting an entire section of my main website to it. Since I have to do all of the website stuff myself, this area is as far behind as so many of my other projects. However, I was finally able to set up a page with links to some handy resources for QuickBooks users; online discussion boards, file transfer utilities, and password recovery programs.

If you have ideas for other resources that should be included in this section, please drop me a line. Please include hyperlinks whenever possible.

KMK

New IRS Study

IRS has let out the fact that they need to do detailed examinations of 50,000 tax returns in order to update their info for profiling of potential tax cheats. This is the same program that was cancelled a few years ago after IRS and Congress received so much flack over the plan and the IRS morons, in the most ridiculous example of negotiating strategy, threatened to call them off if Congress refused to allocate more money for IRS.

Basically, the 50,000 tax returns to be selected will be chosen from the earliest ones received, and will proportionately represent all types of returns. Because most tax returns are 1040s, they should represent 90% or more of the returns selected.

50,000 returns out of the 100 million returns filed every year is a small percentage; but even that possibility is too scary for many people. It’s like the “being hit by lightning” analogy. My advice is the same as it was last time. We prepare the returns as early as we can, especially if there may be some taxes due, and then we file extensions (with payments if needed) to put off the actual date that IRS actually receives the return until 8/15/02 or 10/15/02. The only downside will be for those people who are overpaid and need the refund money. The only way we can get that back is by submitting the actual tax return.

For more details, see IRS News Release 2002-05(News Release IR-2002-05) and IRS fact sheet (News Release FS-2002-07) on the National Research Program.

The best explanation of this I have seen so far is this one from Tom Herman of the Wall Street Journal.

Although IRS admits that this is a research project for its benefit, they haven’t changed their policy of requiring the lucky selectees to foot the bill for their professional representation, which could run into several thousand dollars. That is plain wrong on so many levels that I would encourage anyone concerned about this to lobby their elected rulers to require IRS to reimburse for these fees. It is true that IRS is using very out-date statistics in its tax cheat profiling and should update that data. However, why should innocent people be forced to pay for that out of their own pockets?

KMK

Swearing That Numbers Are Accurate

Here’s an interesting concept, having the CEOs of big corporations sign affidavits, under penalty of perjury, that their financial statements are accurate. I’m sure most people thought this was already being done; but there have been so many ways for the top execs to deny responsibility for the numbers, that this is a good step in the right direction.

This doesn’t sound any different from the penalty of perjury statement that we sign on our tax returns before submitting them to IRS.

In actuality, it may not make a lot more difference because it will only apply to corporations with over $1.2 billion in annual revenue. Companies that big have such large accounting departments and multiple levels of bureaucracy that it won’t be difficult for the CEO to effectively deny any knowledge of the details of the figures.

KMK